A Case Study

Mr. Belknap, joined by two others, was invited to become an independent director of Vitality Foodservice, Inc. Vitality, acquired by a private equity group a few years earlier, had foundered. Its market was slowly eroding as were its margins. Its revenues had dropped, its sole source of supply was threatened, management was paralyzed and the banks were in open revolt.

Belknap and his fellow directors assessed the situation and promptly took the following actions:

  • Created leverage with the sole supplier by developing a viable case for production in company-owned Canadian facilities.
  • Negotiated a new supply agreement on far more favorable terms than previously thought possible and negotiated the elimination of the supplier's exclusivity status.
  • Negotiated a comprehensive consensual financial restructuring with the bank group in partnership with the Company's financial advisors.

Having stabilized the patient, Belknap and the directors moved on to the next steps:

  • Recommended the replacement of the President/COO. The banks, who were now also the stockholders, agreed and a new CEO was appointed.
  • Repaired badly damaged relationships with major customers and the distributors.
  • Adjusted corporate staffing levels to reflect the realities of the business.
  • Reduced capex by 30% by rationalizing the distribution of beverage dispensers.
  • Reduced working capital by eliminating marginal SKUs and other measures.
  • Revamped management compensation programs to create realistic incentives for performance that rewarded the stakeholders.
  • Increased EBITDA from $17 million to $30 million and improved annual free cash flow by $17 million.

On a strategic level, Belknap and his two fellow directors recommended to the stakeholders that the company be sold in view of the momentum from Vitality's dramatically improved financial performance. Growth potential was limited, the risk/reward ratio was not in its favor, and certain positive market dynamics made the timing of a sale favorable. The company was successfully sold in September, 2004. Belknap and his associates managed the sale process; no investment bankers were involved.


When John Belknap first became involved with Vitality in late 2002, the debt was trading at a level that valued the company at $80 million. The company was sold less than two years later, and the banks netted $160 million in cash, a 100% return, as a result of the value created by the efforts of John Belknap and his team.